Lessons from The Richest Man in Babylon
Nov 25, 2016
Sometime in the early 1980’s, when I was first married, I was given a pamphlet from a teller at my bank. The booklet made an impression on me as it revealed the secrets to accumulating wealth. Recently, while searching for a book on Amazon, I learned that the Richest Man In Babylon pamphlet was actually part of a book written in 1926 by George Samuel Clason. The parables in this book are worth repeating over again. The 8 financial lessons should be rules to live by, no matter what you earn, profession you are in or your current stage in life.
- Pay ourselves first. Pay yourself 10% of all you earn. You cannot accumulate wealth unless you save first and pay everything else after you save for yourself.
- Control your expenses. Live below your means. The best advice to becoming wealthy is to keep expenditures down even when earnings increase. I recall when we were purchasing our current home almost 30 years ago. The realtor asked me why we were looking at homes in the $100,000 range when we could afford a $150,000 home. I told the realtor that I had already calculated our budget and we were buying a home that had monthly mortgage, insurance, and tax payments within my budget, not someone else’s budget.
- Make your money work for you. Invest so that you can take advantage of compounding interest. Don’t spend the earnings, but put them to work too.
- Guard your treasures from loss. Protect your wealth and earning power from losses with insurance. Guard your family from loss of your earnings. Everyone should have an emergency fund so that you do not have to spend funds from your investment accounts for what should be normal replacement or repair.
- Make your dwelling a profitable investment. One should own their own home rather than renting because then money can be invested in the home or invested in other things rather than handed over to the landlord.
- Insure a future income. Invest for retirement and your family’s well-being after your passing.
- Invest in yourself to increase your ability to earn. A college education is one of the best investments you can make. College is not a requirement to be successful, but it opens the door to greater possibilities. Becoming wiser and better at our profession doesn’t happen overnight or without some time, energy, and sacrifice.
- Know where you are and where you are going. Set goals. Track your wealth. You cannot manage what you do not measure. Keep good records that are accessible to your family.
This book, though written in 1926, still portrays stories that are commonsensical and applicable to today’s financial environment. These rules for creating, growing, and retaining wealth are timeless and true.
CFP®, FLMI, Annuity Product Manager
Eight financial lessons from the Richest Man in Babylon by George Samuel Clason.
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